With a considerable number of companies being incorporated on a monthly basis, there are a number of first-time directors stepping into this role and assuming duties, responsibilities and functions (“Fiduciary Duties”) to act in the best interest of the company and the shareholders.
As a director, you need to understand that theses Fiduciary Duties must be discharged with reasonable care and skill. In order to do so, it is important to mention that the conduct of directors is governed and regulated through:
- Statutory Law – Companies Act of No 71 of 2008.
- Companies Memorandum of Incorporation and shareholders agreement; and
- Common Law and Case Law
Directors are responsible for the day-to-day running of the company and tasked with the responsibility to direct the company, as one of the main objectives of a business is to make a profit and ensure that the appropriate risk mitigation measures are in place.
Directors Fiduciary Duties are there to ensure and promote good corporate governance and ensure the best interest of the company and the shareholders are placed above their own personal interests. How does a director give effect to his fiduciary duties?
In terms of section 76 of the Act the standards of directors’ conduct can be summarized as follows:
- Acting in good faith and for proper purpose.
- In the best interests of the company (shareholders included); and
- With the degree of care, skill and diligence reasonably expected.
In line with the aforesaid, the director must not use their position to:
- Gain an advantage for the director, other any other person, other than the company or subsidiary; and
- To knowingly cause harm to the company or subsidiary of the company.
If the director is found to have failed to uphold these standards of conduct / Fiduciary Duties, they can open themselves up to be held accountable, even to the extent that they can be held personally responsible.
To this end, the importance of directors exercising their duties, responsibilities and functions can not be understated and must be treated seriously when being appointed to this position.
If you find yourself in a situation where you are a director or have co-directors who have failed to uphold their Fiduciary Duties, please do not hesitate to contact BBP Law Attorneys. We can arrange a meeting to provide you with the necessary legal assistance or guidance on the appropriate steps that need to be taken in this regard.